Juniper Networks Inc. (JNPR) has been targeted by activist hedge fund Elliott Management Corp., which will seek cost cuts, stock buybacks and other changes at the networking-gear maker.
Elliott, a New York fund run by billionaire Paul Singer, has amassed 6.2 percent of Juniper, according to a statement today. The firm is seeking talks with management and the company’s board.
Shares of Juniper, the second-largest maker of computer-networking equipment, have trailed the Standard & Poor’s 500 Index over the past three years. The Sunnyvale, California-based company also faces a management transition: Chief Executive Officer Shaygan Kheradpir took over just this month, following the retirement of Kevin Johnson.
“Juniper’s new CEO along with its existing management team and board have a unique opportunity to immediately unlock significant value at the company,” Jesse Cohn, portfolio manager at Elliott, said in the statement.
To increase the stock price, Elliott is pushing for additional share repurchases and the payment of a dividend. The fund, which may disclose its Juniper holdings in regulatory filings today, also has proposals to cut expenses and streamline the company’s products. The idea would be to boost the shares to $35 to $40 a share, up as much as 70 percent from their closing price of $23.54 on Jan. 10, the last trading day before Elliott’s announcement.
“Juniper welcomes the opinions and insights of its shareholders and is always open to constructive input toward the goal of enhancing shareholder value,” Cindy Ta, a spokeswoman for the company, said in an e-mailed response.
Juniper shares jumped as much as 9.7 percent to $25.83, its biggest intraday gain in more than a year, after Bloomberg News first reported on the Elliott plan. The stock traded at $25.69 as of 9:39 a.m. in New York.
Juniper could cut $200 million in annual operating costs and buy back $2.5 billion in stock immediately and an additional $1 billion in 2015, Elliott said in a presentation of its proposals. The company should also review its security and switching businesses to streamline products, and “focus on projects and areas where Juniper has clear competencies and the greatest risk-adjusted return on investment,” Elliott said.
Activist investors like Elliott typically run campaigns that pressure management and directors to make changes to boost shareholder gains. Elliott’s targeting of Juniper follows a takeover offer last week for another networking company, Riverbed Technology Inc. (RVBD) On Jan. 8, the fund offered to buy Riverbed for $19 a share, valuing the business at $3.08 billion. Elliott said it made the proposal in hopes that it would elicit other acquisition bids.
Elliott also reached a standstill agreement last week with Compuware Corp. (CPWR), which spurned a takeover bid from the firm last year. As part of that accord, Elliott will nominate two directors, giving it more clout at the technology company.
Juniper, which ranks second to Cisco Systems Inc. (CSCO) in the networking market, returned to profit growth in 2013 following two years of declines. The shares were already trading at their highest level in 22 months before Elliott’s announcement, bolstered by options buying last week.